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Community investment notes get returns, but with few of the headaches of traditional SRI

Tom Ricketts standing outside Wrigley Field. (Photo: AP)

What's more fun—bonds or professional baseball? When asked about the amount of time spent running the day-to-day operations of his Chicago-based investment firm, Incapital, Tom Ricketts doesn't hesitate.

“I’m actually pretty busy with that baseball team over your shoulder,” Ricketts quips, pointing to a television screen running a highlight reel.

The chairman of both Incapital and the Chicago Cubs (after leading his family’s acquisition in 2009), nonetheless still has a strong hand in the firm, and begins by noting its role as “a pioneer in offering corporate bonds through brokerage firms to investors.”

“We’ve now moved on to distribute additional products such as brokered deposits and UITs,” he adds.

Today, Incapital underwrites and distributes fixed income securities and structured notes through more than 700 broker-dealers, institutions, advisors and wealth managers.

When asked about the firm’s legacy of innovation and how it’s sidestepped the regulatory issues so many other firms have experienced when introducing “great, new products” to the market, only to subsequently go bust, Ricketts simply claims that “Each and every product we’ve offered has been thoroughly thought through from the standpoint of the investor at every level.”

That simplicity translates to everything the firm does.

“We’re very consistent in our messaging; we tell investors not to time the market or put all their eggs in one basket, rather, follow a roadmap and don’t overact to market events.”

Sounds basic enough, but coming from a major league baseball owner seems to give it added heft.

His latest passion are community investment notes, a form of SRI that doesn’t tangle with screens, arguments over sacrificed returns and opportunity costs like equity-based socially responsible investing.

“For everyone looking for SRI, here it is,” he emphatically states (for Ricketts anyway). “It’s like buying a bank CD or as simple as buying any other financial instrument. It’s not luck, but rather by design that they’re safe, have low transaction costs and low friction.”

Arguing that there are no “real, tangible opportunity costs, “it’s a way to do social good and enjoy returns.”

When asked about his “skin in the game” with the product he is promoting, he says his broker calls when the notes mature and he simply rolls them over.

“It’s very direct, and with none of the complaints heard on the equity SRI side. The notes are used for affordable housing, to help start businesses and for micro lending in other countries. They have extremely low default rates.”

As to his other love, the Cubs, and the renovations currently happening at famed Wrigley Field, he mentions the intricacies (delicately put) of dealing with Chicago politics—and waiting for the right opportunities to move the renovation process ahead.